SECURITIES ACT FILE NO. 33-12213
INVESTMENT COMPANY ACT FILE NO. 811-5037
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 40 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 41 [X]
(Check appropriate box or boxes)
PROFESSIONALLY MANAGED PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
479 West 22nd Street
New York, NY 10011
Registrant's Telephone Number, including Area Code:
(212) 633-9700
Steven J. Paggioli
Professionally Managed Portfolios
479 West 22nd Street
New York, NY 10011
(Name and Address of Agent for Service)
Copy to:
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker
345 California Street
San Francisco, CA 94104
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It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Title of Securities Being Reagistered:
Shares of Beneficial Interest, No Par Value
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Expense
Table
Item 3. Financial Highlights................. Financial
Highlights
Item 4. General Description of Registrant.... Objective and
Investment
Approach of the
Fund
Item 5. Management of the Fund............... Management
of the Fund
Item 5A Management's Discussion of Fund See Annual
Performance Reports to
Shareholders
Item 6. Capital Stock and Other Securities. . . Distributions
and Taxes;
How the
Fund's Per
Share Value
is Determined
Item 7. Purchase of Securities Being Offered . . How to Invest
in the Fund;
How the
Fund's Per
Share Value
is Determined
Item 8. Redemption or Repurchase. . . . . . . . How to Redeem
an Investment
in the Fund
Item 9. Pending Legal Proceedings . . . . . . . N/A
Part B
Item 10. Cover Page ............................. Cover Page
Item 11. Table of Contents....................... Table of
Contents
Item 12. General Information and History . . . . The Trust;
General
Information
Item 13 Investment Objectives and Policies .... Investment
Objective and
Policies;
Investment
Restrictions
Item 14. Management of the Fund................... Trustees and
Executive Officers
Item 15. Control Persons and Principal Holders
of Securities............................ General Information
Item 16. Investment Advisory and Other Services.... The Fund's Investment
Advisor; the Fund's
Administrator; General
Information
Item 17. Brokerage Allocation...................... Execution of
Portfolio
Transactions
Item 18. Capital Stock and Other Securities........ General
Information
Item 19. Purchase, Redemption and Pricing of
Shares Being Offered.............. Additional
Purchase &
Redemption
Information
Item 20. Tax Status.............................. Distributions
& Tax Infor-
mation
Item 21. Underwriters............................ The Fund's
Distributor
Item 22. Performance Information.................. Performance
Information
Item 23. Financial Statements.................... N/A
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement
<PAGE>
LIGHTHOUSE CONTRARIAN FUND
10000 Memorial Drive, Suite 660
Houston, TX 77024
(713) 688-6881
(800) 282-2340
The LIGHTHOUSE CONTRARIAN FUND (the "Fund") is a mutual fund with the
investment objective of seeking growth of capital. The Fund seeks to achieve its
objective by investing primarily in equity securities (common and preferred
stocks). Lighthouse Capital Management, Inc. (the "Advisor") serves as
investment advisor to the Fund.
The Advisor uses a contrarian investment approach for the Fund, seeking
sound, undervalued companies in out of favor industries. The Fund may engage in
short sales of securities, and may purchase shares of smaller and younger
companies, which may involve special risks. The Fund is not a complete
investment program, and may not be appropriate for short-term investors. See pp.
5-6.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated
November , 1997, as may be amended from time to time, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. This
Statement of Additional Information is available without charge upon written
request to the Fund at the address given above.
TABLE OF CONTENTS
Expense Table 2
Financial Highlights 3
Advisor Investment Returns 4
Objective and Investment Approach of the Fund; Risk Factors 5
Management of the Fund 7
Distribution Plan 8
How To Invest in the Fund 8
How To Redeem an Investment in the Fund 10
Services Available to the Fund's Shareholders 11
How the Fund's Per Share Value Is Determined 11
Distributions and Taxes 12
General Information 12
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated November , 1997
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Fund.
The purpose of the following fee table is to provide an understanding of the
various costs and expenses which may be borne directly or indirectly by an
investment in the Fund. Actual expenses may be more or less than those shown.
The Fund has adopted a plan of distribution under which the Fund will pay the
Advisor as Distribution Coordinator a fee at an annual rate of up to 0.25% of
the Fund's net assets. A long-term shareholder may pay more, directly and
indirectly, in sales charges and such fees than the maximum sales charge
permitted under the rules of the National Association of Securities Dealers.
Shares will be redeemed at net asset value per share.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses
(As a percentage of average net assets)
Advisory Fees 1.25%
12b-1 Expenses 0.25%
Other Expenses 0.50%**
Total Fund Operating Expenses 2.00%**
**The Advisor is currently undertaking to limit the Fund's expense ratio to
2.00% annually. In the absence of this limitation, the Fund's ratio of expenses
to average net assets would have been 2.24% for the fiscal year ended August 31,
1997.
Example
This table illustrates the net transaction and operating expenses that
would be incurred by an investment in the Fund over different time periods
assuming a $1,000 investment,a 5% annual return, and redemption at the end of
each time period.
The Example shown above should not be considered a representation of past
or future expenses and actual expenses may be greater or less than shown. In,
addition, federal regulations require the Example to assume a 5% annual return,
but the Fund's actual return may be higher or lower. See "Management of the
Fund."
The LIGHTHOUSE CONTRARIAN FUND (the "Fund"), formerly named Lighthouse
Growth Fund, is a diversified series of Professionally Managed Portfolios (the
"Trust"), an open-end management investment company offering redeemable shares
of beneficial interest. Shares of the Fund may be purchased at their net asset
value per share. The minimum initial investment is $2,000 with subsequent
investments of $100 or more. Shares will be redeemed at net asset value per
share.
ADVISOR INVESTMENT RETURNS
Set forth in the table below are certain performance data provided by the
Advisor relating to its individually managed Equity accounts. These accounts had
substantially the same investment objective as the Fund and have been managed
using substantially similar investment strategies and techniques as those used
by the Fund. See "Objective and Investment Approach of the Fund" above . The
Portfolio Manager for these accounts is the same individual who manages the
Fund. The results presented are not intended to predict or suggest the return to
be experienced by the Fund or the return an investor might achieve by investing
in the Fund. Results may differ because of, among other things, differences in
brokerage commissions paid, account expenses, including investment advisory
fees, (which expenses and fees may be higher for the Fund than for the
accounts), the size of positions taken in relation to account size,
diversification of securities, timing of purchases and sales, timing of cash
additions and withdrawals, the private character of the composite accounts
compared with the public character of the Fund, and the tax-exempt status of
some of the accounts compared with the Fund and its shareholders. Investors
should be aware that the use of different methods of determining performance
could result in different performance results. Investors should not rely on the
performance data on the following page as an indication of future performance of
the Advisor or the Fund.
Average Annual Total Returns (%)
(for periods ended September 30, 1997)
Lighthouse Capital Standard & Poor's
Equity Accounts 500 Index
One year % %
Three years % %
Five years % %
1. Results account for both income and capital appreciation or depreciation
(Total Return). Returns are time-weighted and calculated in compliance with the
Association for Investment Management and Research ("AIMR") performance
presentation standards, reduced for investment advisory fees.
2. Investors should note that the Fund computes and discloses its average
annual compounded rate of return using the standard formula set forth in SEC
rules, which differs in certain respects from returns calculated under the AIMR
standards noted above. Unlike the AIMR performance presentation standards that
link quarterly rates of return, the SEC total return calculation method calls
for computation and disclosure of an average annual compounded rate of return
for one, five and ten year periods or shorter periods from inception. The
calculation provides a rate of return that equates a hypothetical initial
investment of $1,000 to an ending redeemable value. While the returns shown for
the Advisor are net of advisory fees, the SEC calculation formula requires that
returns be shown for the Portfolios net of advisory fees as well as any maximum
applicable sales charges and all other Portfolio operating expenses. See
"Performance Information" at page 12.
4. The Lighthouse Capital Equity Account Composite shown includes all
accounts managed by the Advisor that meet the criteria for inclusion in the
composite for each period presented.
5. The Standard & Poor's 500 Index is an unmanaged index composed of 500
industrial, utility, transportation and financial companies of the U.S. markets.
The index represents about 75% of New York Stock Exchange ("NYSE") market
capitalization and 30% of NYSE issues. It is a capitalization-weighted index
calculated on a total return basis with dividends reinvested.
Lighthouse Contrarian Fund
Average Annual Total Returns (%)
(for periods ended September 30, 1997)
Year Ended Inception on September 29, 1995
September 30, 1997 through September 30, 1997
26.77% 19.62%
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
The following information has been audited by Ernst & Young, L.L.P.,
independent accountants, whose unqualified report covering the fiscal period
ended August 31, 1997 is incorporated by reference herein and appears in the
annual report to shareholders. This information shoud be read in conjunction
with the financial statements and accompanying notes thereto which appear in the
annual report and are incorporated by reference into the Statement of Additional
Information. Further information about the Fund's performance is included in its
annual report, which may be obtained without charge by writing or calling the
address or telephone number on the Prospectus cover page.
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
Year September 29, 1995*
Ended through
August 31, 1997 August 31, 1996
Net asset value, beginning of period $13.57 $12.00
Income from investment operations:
Net investment income .05 (.09)
Net realized and unrealized
gain on investments 2.41 1.72
Total from investment operations 2.46 1.63
Less distributions:
From net capital gains (.27) (.06)
Net asset value, end of period $15.76 $13.57
Total return 18.22% 13.67%0
Ratios/supplemental data:
Net assets, end of period (millions) $30.5 $14.0
Ratio of expenses to average net assets:
Before expense reimbursement 2.24% 2.95%+
After expense reimbursement 2.00% 2.00%+
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement (0.13%) (2.14)%+
After expense reimbursement 0.11% (1.19)%+
Portfolio turnover rate 21.94% 20.56%
Average commission rate paid per share $.0489 $.0588
*Commencement of operations.
+Annualized.
0Not Annualized.
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND; RISK FACTORS
The investment objective of the Fund is to seek growth of capital. The Fund
seeks to achieve its objective by investing primarily in equity securities.
Equity securities in which the Fund invests include common stocks and securities
having the characteristics of common stocks, such as convertible preferred
stocks, convertible debt securities and warrants. There is, of course, no
assurance that the Fund's objective will be achieved.
Because prices of securities held by the Fund fluctuate, the value of an
investment in the Fund will vary, as the market value of its investment
portfolio changes and when shares are redeemed, they may be worth more or less
than their original cost. The Fund is diversified, which under applicable
federal law means that as to 75% of its total assets, no more than 5% may be
invested in the securities of a single issuer and in no more than 10% of the
voting securities of a single issuer.
Investment Approach. The Advisor uses a contrarian strategy to seek what it
believes to be the best investments. Since stocks do not become bargains when
they are popular, the Advisor tends to look for sound, undervalued companies in
out-of-favor industries. The Advisor seeks companies that are technologically
aggressive, fiscally conservative and globally competitive. Companies seeking
government protection from what they believe to be "unfair competition" are
avoided.
The Advisor uses a long-term approach to valuation. It is the Advisor's
view that most investors are infatuated with short-term earnings. As a result,
companies with margins that are temporarily low are often discarded. The Advisor
seeks companies that are not afraid to forego short-term profits in order to
invest in research, marketing and service--all areas which should lead to higher
earnings in the future. Conversely, the Advisor avoids companies that neglect
these areas because it appears likely that long-term profitability of such
companies will suffer.
Although equity securities are the primary focus for the Fund, the Advisor
may also purchase fixed income securities where it believes that such securities
offer the potential for capital growth. The Fund is permitted to hold up to 25%
of its net assets in fixed-income securities, but it is not expected that under
normal circumstances more than 10% of the Fund's portfolio would be invested in
such securities. Fixed-income securities eligible for purchase by the Fund
include those rated investment grade, i.e., rated BBB or better by Standard &
Poor's Corporation ("S&P"), Duff & Phelps Credit Rating Co. ("Duff"), or Fitch
Investors Service, Inc. ("Fitch"), or Baa or better by Moody's Investors Service
("Moody's"). Securities rated BBB by S&P, Duff, and Fitch or Baa by Moody's are
investment grade, but Moody's considers securities rated Baa to have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity for such securities to make principal and
interest payments than is the case for higher-rated debt securities.
Within the overall limit on investment in fixed-income securities, the Fund
also may invest in corporate debt securities that are rated below investment
grade or which are unrated. Such securities typically carry higher coupon rates
than investment grade securities but also are described as speculative by both
Moody's and S&P and may be subject to greater market price fluctuations, less
liquidity, and greater risk of income or principal, including a greater
possibility of default or bankruptcy of the issuer of such securities, than are
more highly rated debt securities. Lower rated or unrated fixed income
securities also are likely to be more sensitive to adverse economic or company
developments. The Advisor seeks to reduce the risks associated with investing in
such securities by limiting the Fund's holdings in such securities and by the
depth of its own credit analysis. In selecting below investment grade
securities, the Advisor seeks securities in companies with improving cash flows
and balance sheet prospects, whose credit ratings the Advisor views as likely to
be upgraded. The Advisor believes that such securities can produce returns
similar to equities.
Short Sales. The Fund may engage in short sales of securities. In a short
sale, the Fund sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The Fund is then obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. This price may or may not be less than the price at which the
security was sold by the Fund. Until the security is replaced, the Fund is
required to pay to the lender any dividends or interest which accrue during the
period of the loan. In order to borrow the security, the Fund may also have to
pay a premium which would increase the cost of the security sold. The proceeds
of the short sale will be retained by the broker, to the extent necessary to
meet margin requirements, until the short position is closed out.
The Fund also must segregate liquid assets equal to the difference between
(a) the market value of the securities sold short at the time they were sold
short and (b) the value of the collateral deposited with the broker in
connection with the short sale (not including the proceeds from the short sale).
While the short position is open, the Fund must maintain segregated assets at
such a level that (1) the amount segregated plus the amount deposited with the
broker as collateral equals the current market value of the securities sold
short and (2) the amount segregated plus the amount deposited with the broker as
collateral is not less than the market value of the securities at the time they
were sold short.
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and date on which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased and the amount of any loss will be increased by any dividends or
interest the Fund may be required to pay in connection with the short sale. The
dollar amount of short sales at any one time (not including short sales
against-the-box) may not exceed 331/3% of the net assets of the Fund.
A short sale is "against-the-box" if at all times when the short position
is open the Fund owns an equal amount of the securities or securities
convertible into, or exchangeable without further consideration for, securities
of the same issue as the securities sold short. Such a transaction serves to
defer a gain or loss for Federal income tax purposes.
Smaller Companies. Some of the companies held by the Fund may be smaller
and younger than companies whose shares trade on the major stock exchanges.
Accordingly, shares of these companies, which typically trade over-the-counter,
may be more volatile than those of larger exchange-listed companies. New or
improved products or methods of development may have a substantial impact on the
earnings and revenues of such companies, and such developments could have a
positive or negative impact on their shares. Some of these companies may be
thinly traded. From time to time, the Fund and other client accounts of the
Advisor, on a collective basis, may hold a significant amount of such companies'
outstanding shares or trading volume. During such times, the Fund's ability to
dispose of such securities without affecting market price could be limited. The
Fund will monitor the level of investment in such securities to determine
whether they may be considered illiquid and subject to the Fund's limitation
that no more than 15% of its total assets may in invested in restricted or
illiquid securities.
Repurchase Agreements. The Fund may enter into repurchase agreements in
order to earn additional income on available cash, or as a defensive investment
in periods when the Fund is primarily in short-term maturities. A repurchase
agreement is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a U.S. Government security (which may be of any maturity)
and the seller agrees to repurchase the obligation at a future time at a set
price, thereby determining the yield during the purchaser's holding period
(usually not more than seven days from the date of purchase). Any repurchase
transaction in which the Fund engages will require full collateralization of the
seller's obligation during the entire term of the repurchase agreement. In the
event of a bankruptcy or other default of the seller, the Fund could experience
both delays in liquidating the underlying security and losses in value. However,
the Fund intends to enter into repurchase agreements only with banks with assets
of $500 million or more that are insured by the Federal Deposit Insurance
Corporation and the most creditworthy registered securities dealers pursuant to
procedures adopted and regularly reviewed by the Trust's Board of Trustees. The
Advisor monitors the creditworthiness of the banks (other than the custodian
bank) and securities dealers with whom the Fund engages in repurchase
transactions.
When-Issued Securities. The Fund may purchase securities on a when-issued
basis, for payment and delivery at a later date, generally within one month. The
price and yield are generally fixed on the date of commitment to purchase, and
the value of the security is thereafter reflected in the Fund's net asset value.
During the period between purchase and settlement, no payment is made by the
Fund and no interest accrues to the Fund. At the time of settlement, the market
value of the security may be more or less than the purchase price. The Fund
limits its investments in when-issued securities to less than 5% of its total
assets. When the Fund purchases securities on a when-issued basis, it segregates
liquid assets in an amount equal to the purchase price as long as the obligation
to purchase continues.
Portfolio Turnover. The annual rate of portfolio turnover is anticipated to
be approximately 25%. In general, the Advisor will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
Other Permitted Investments and Risks. The Fund is authorized to invest in
foreign securities, engage in options transactions on equity securities and
indexes, to borrow money and to lend portfolio securities. However, the Fund may
not engage in any of such activities to an extent greater than 5% of its net
assets. For more information on such securities and practices and the risks
associated with them, see the Fund's Statement of Additional Information.
The Fund has adopted certain investment restrictions, which are described
fully in the Statement of Additional Information. Like the Fund's investment
objective, certain of these restrictions are fundamental and may be changed only
by a majority vote of the Fund's outstanding shares.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Advisor is located at
10000 Memorial Drive, Suite 660, Houston, TX 77024. The Advisor was founded in
1988 and is controlled by Mr. Paul G. Horton, President and Managing Director
and Mr. Kevin P. Duffy, Research Director and Portfolio Manager. The Advisor
provides investment advisory services to individual and institutional investors
with assets of approximately $360 million. Mr. Duffy is responsible for
management of the Fund's portfolio.
The Advisor provides the Fund with advice on buying and selling securities,
manages the investments of the Fund, furnishes the Fund with office space and
certain administrative services, and provides most of the personnel needed by
the Fund. As compensation, the Fund pays the Advisor a monthly management fee
(accrued daily) based upon the average daily net assets of the Fund at the rate
of 1.25% annually. This fee is higher than that paid by most investment
companies.
Investment Company Administration Corporation (the "Administrator") acts as
the Fund's Administrator under an Administration Agreement. Under that
agreement, the Administrator prepares various federal and state regulatory
filings, reports and returns for the Fund, prepares reports and materials to be
supplied to the trustees, monitors the activities of the Fund's custodian,
transfer agent and accountants, and coordinates the preparation and payment of
Fund expenses and reviews the Fund's expense accruals. For its services, the
Administrator receives a monthly fee at the annual rate specified on the
following page.
Average net assets of the Fund Fee or fee rate
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
The Fund is responsible for its own operating expenses. The Advisor may
waive its fees or reimburse the Fund for its operating expenses at any time in
order to reduce the Fund's expenses. The Advisor is currently undertaking to
limit the Fund's expense ratio to 2.00% annually. Any reductions made by the
Advisor in its fees or payments or reimbursements of expenses which are the
Fund's obligation may be subject to reimbursement by the Fund.
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Advisor may lawfully and
appropriately use in its investment management and advisory capacities. Provided
the Fund receives prompt execution at competitive prices, the Advisor may also
consider the sale of Fund shares as a factor in selecting broker-dealers for the
Fund's portfolio transactions.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act. The Plan provides that the Fund may pay for distribution
and related expenses at an annual rate of up to 0.25% of the Fund's average net
assets to the Advisor as distribution coordinator. Expenses permitted to be paid
by the Fund under its Plan include: preparation, printing and mailing of
prospectuses; shareholder reports such as semiannual and annual reports,
performance reports and newsletters; sales literature and other promotional
material to prospective investors; direct mail solicitation; advertising; public
relations; compensation of sales personnel, advisors or other third parties for
their assistance with respect to the distribution of the Fund's shares; payments
to financial intermediaries for shareholder support; administrative and
accounting services with respect to the shareholders of the Fund; and such other
expenses as may be approved from time to time by the Board of Trustees.
The Rule 12b-1 Distribution Plan allows excess distribution expenses to be
carried forward by the Advisor, as Distribution Coordinator, and resubmitted in
a subsequent fiscal year provided that (i) distribution expenses cannot be
carried forward for more than three years following initial submission; (ii) the
Board of Trustees has made a determination at the time of initial submission
that the distribution expenses are appropriate to be carried forward; and (iii)
the Board of Trustees makes a further determination, at the time any
distribution expenses which have been carried forward are resubmitted for
payment, to the effect that payment at the time is appropriate, consistent with
the objectives of the Plan and in the current best interests of shareholders.
The Advisor, out of its own funds, also may compensate broker-dealers who
have signed dealer agreements for the distribution of the Fund's shares as well
as other service providers who provide shareholder and administrative services.
HOW TO INVEST IN THE FUND
The minimum initial investment is $2,000. Subsequent investments must be at
least $100. First Fund Distributors, Inc. (the "Distributor"), acts as
Distributor of the Fund's shares. The Distributor may, at its discretion, waive
the minimum investment requirements for purchases in conjunction with certain
group or periodic plans. In addition to cash purchases, shares may be purchased
by tendering payment in kind in the form of shares of stock, bonds or other
securities, provided that any such tendered security is readily marketable, its
acquisition is consistent with the Fund's objective and it is otherwise
acceptable to the Fund's Advisor.
Shares of the Fund are offered continuously for purchase at their net asset
value per share next determined after a purchase order is received. The public
offering price is effective for orders received by the Fund prior to the time of
the next determination of the Fund's net asset value. Orders received after the
time of the next determination of the Fund's net asset value will be entered at
the next calculated public offering price. Investors may be charged a fee if
they effect a transaction in fund shares through a broker or agent. Such brokers
or agents may also impose different minimum transaction amounts.
Investors may purchase shares of the Fund by check or wire:
By Check: For initial investments, an investor should complete the Fund's
Account Application (included with this Prospectus). The completed application,
together with a check payable to "Lighthouse Contrarian Fund," should be mailed
to the Fund's Transfer Agent: Lighthouse Contrarian Fund, P.O. Box 640856,
Cincinnati, OH 45264-0856. A purchase order sent by overnight mail should be
sent to Lighthouse Contrarian Fund, 425 Walnut Street, M.L.
6118, Cincinnati, OH 45202.
For subsequent investments, a stub is attached to the account statement
sent to shareholders after each transaction. The stub should be detached from
the statement and, together with a check payable to "Lighthouse Contrarian
Fund," mailed to the Transfer Agent in the envelope provided at the address
indicated above. The investor's account number should be written on the check.
By Wire: For initial investments, before wiring funds, an investor should
call the Transfer Agent at (800) 282-2340 between the hours of 9:00 a.m. and
4:00 p.m. Eastern time, on a day when the New York Stock Exchange is open for
trading in order to receive an account number. The Transfer Agent will request
the investor's name, address, tax identification number, amount being wired and
wiring bank. The investor should then instruct the wiring bank to transfer funds
by wire to: Star Bank, N.A. Cinti/Trust, ABA #0420-0001-3, Attn: Lighthouse
Contrarian Fund, DDA #483897971, for credit to Lighthouse Contrarian Fund, for
further credit to [investor's name and account number]. The investor should also
ensure that the wiring bank includes the name of the Fund and the account number
with the wire. If the funds are received by the Transfer Agent prior to the time
that the Fund's net asset value is calculated, the funds will be invested on
that day; otherwise they will be invested on the next business day. Finally, the
investor should write the account number provided by the Transfer Agent on the
Application Form and mail the Form promptly to the Transfer Agent.
For subsequent investments, an investor should call the Transfer Agent at
(800) 282-2340 before the wire is sent. Failure to do so will cause the purchase
to be credited the next day, when the Transfer Agent receives notice of the
wire. The investor's bank should wire funds as indicated above. It is essential
that complete information regarding the investor's account be included in all
wire instructions in order to facilitate prompt and accurate handling of
investments. Investors may obtain further information from the Transfer Agent
about remitting funds in this manner and from their own banks about any fees
that may be imposed.
Payment of proceeds from redemption of shares purchased with an initial
investment made by wire may be delayed until one business day after the
completed Account Application is received by the Fund. All investments must be
made in U.S. dollars and, to avoid fees and delays, checks should be drawn only
on U.S. banks and should not be made by third party check. A charge may be
imposed if any check used for investment does not clear. The Fund and the
Distributor reserve the right to reject any purchase order in whole or in part.
If an order, together with payment in proper form, is received by the
Transfer Agent by the close of trading on the New York Stock Exchange (currently
4:00 p.m., New York City time), Fund shares will be purchased at the offering
price determined as of the close of trading on that day. Otherwise, Fund shares
will be purchased at the offering price determined as of the close of trading on
the New York Stock Exchange on the next business day.
Federal tax regulations require that investors provide a certified Taxpayer
Identification Number and certain other required certifications upon opening or
reopening an account in order to avoid backup withholding of taxes at the rate
of 31% on taxable distributions and proceeds of redemptions. See the Fund's
Account Application for further information concerning this requirement.
The Fund is not required to issue share certificates. All shares are
normally held in non-certificated form registered on the books of the Fund and
the Fund's Transfer Agent for the account of the shareholder.
HOW TO REDEEM AN INVESTMENT IN THE FUND
Shareholders have the right to redeem all or any portion of their
outstanding shares at the current net asset value on each day the New York Stock
Exchange is open for trading. The redemption price is the net asset value per
share next determined after the shares are validly tendered for redemption.
Direct Redemption. A written request for redemption must be received by the
Fund's Transfer Agent in order to constitute a valid tender for redemption.
Redemption requests should be sent to Lighthouse Contrarian Fund, P. O. Box
5536, Hauppauge, NY 11788-0132. Redemption requests should (a) state the number
of shares to be redeemed, (b) identify the shareholder's account number and (c)
be signed by each registered owner exactly as recorded on the account
registration. To protect the Fund and its shareholders, a signature guarantee is
required for certain transactions, including redemptions. Signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution" as
defined in the federal securities laws. These institutions include banks,
broker-dealers, credit unions and savings institutions. A broker-dealer
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. A
notary public is not an acceptable guarantor.
Telephone Redemption. Shareholders who complete the Redemption by Telephone
portion of the Fund's Account Application may redeem shares on any business day
the New York Stock Exchange is open by calling the Fund's Transfer Agent at
(800) 385-7003 between the hours of 9:00 a.m. and 4:00 p.m. Eastern time.
Redemption proceeds will be mailed to the address of record or wired at the
shareholder's direction the next business day to the predesignated account. The
minimum amount that may be wired is $1,000 (wire charges, if any, will be
deducted from redemption proceeds).
By establishing telephone redemption privileges, a shareholder authorizes
the Fund and its Transfer Agent to act upon the instruction of any person by
telephone to redeem from the account for which such service has been authorized
and send the proceeds to the address of record on the account or transfer the
proceeds to the bank account designated in the Authorization. The Fund and the
Transfer Agent will use procedures to confirm that redemption instructions
received by telephone are genuine, including recording of telephone instructions
and requiring a form of personal identification before acting on such
instructions. As long as these identification procedures are followed, neither
the Fund nor its agents will be liable for any loss, liability or cost which
results from acting upon instructions of a person believed to be a shareholder
with respect to the telephone redemption privilege. The Fund may change, modify,
or terminate these privileges at any time upon at least 60 days' notice to
shareholders.
Shareholders may request telephone redemption after an account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity.
General. Payment of the redemption proceeds will be made promptly, but not
later than seven days after the receipt of all documents in proper form,
including a written redemption order with appropriate signature guarantee in
cases where telephone redemption privileges are not being utilized. The Fund may
suspend the right of redemption under certain extraordinary circumstances in
accordance with the Rules of the Securities and Exchange Commission. In the case
of shares purchased by check and redeemed shortly after purchase, the Fund will
not mail redemption proceeds until it has been notified that the check used for
the purchase has been collected, which may take up to 15 days from the purchase
date. To minimize or avoid such delay, investors may purchase shares by
certified check or federal funds wire. A redemption may result in recognition of
a gain or loss for Federal income tax purposes.
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to redeem shares in any account, other than retirement plan
or Uniform Gift to Minors Act accounts, if at any time, due to redemptions by
the shareholder, the total value of a shareholder's account does not equal at
least $2,000. If the Fund determines to make such an involuntary redemption, the
shareholder will first be notified that the value of his account is less than
$2,000 and will be allowed 30 days to make an additional investment to bring the
value of the account to at least $2,000 before the Fund takes any action.
SERVICES AVAILABLE TO THE FUND'S SHAREHOLDERS
Retirement Plans. The Fund offers a prototype Individual Retirement Account
("IRA") plan and information is available from the Distributor or from your
securities dealer with respect to Keogh, Section 403(b) and other retirement
plans offered. Investors should consult a tax adviser before establishing any
retirement plan.
Automatic Investment Plan. For the convenience of shareholders, the Fund
offers a preauthorized check service under which a check is automatically drawn
on the shareholder's personal checking account each month for a predetermined
amount (but not less than $100), as if the shareholder had written it himself.
Upon receipt of the withdrawn funds, the Fund automatically invests the money in
additional shares of the Fund at the current offering price. Purchases are made
at Net Asset Value at the close of regular trading on the New York Stock
Exchange (the "Exchange") (currently 4:00 P.M. Eastern time) on or about the
20th day of the month. Applications for this service are available from the
Distributor. There is no charge by the Fund for this service. The Distributor
may terminate or modify this privilege at any time, and shareholders may
terminate their participation by notifying the Transfer Agent in writing,
sufficiently in advance of the next scheduled withdrawal.
Automatic Withdrawals. As another convenience, the Fund offers an Automatic
Withdrawal Program whereby shareholders may request that a check drawn in a
predetermined amount be sent to them each month or calendar quarter. A
shareholder's account must have Fund shares with a value of at least $10,000 in
order to start an Automatic Withdrawal Program, and the minimum amount that may
be withdrawn each month or quarter under the Automatic Withdrawal Program is
$100. Redemptions are made at net asset value as of the close of regular trading
on the Exchange on the 25th day of each month (or the next business day). This
Program may be terminated or modified by a shareholder or the Fund at any time
without charge or penalty.
A withdrawal under the Automatic Withdrawal Program involves a redemption
of shares, and may result in a gain or loss for federal income tax purposes. In
addition, if the amount withdrawn exceeds the dividends credited to the
shareholder's account, the account ultimately may be depleted.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined once daily as of the
close of public trading on the Exchange (currently 4:00 p.m. Eastern time) on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of the Fund's total assets, less its
liabilities, by the number of Fund shares outstanding.
Portfolio securities are valued using current market values, if available.
Securities for which market quotations are not readily available are valued at
fair values as determined in good faith by or under the supervision of the
Trust's officers in accordance with methods which are specifically authorized by
the Board of Trustees. Short-term obligations with remaining maturities of sixty
days or less are valued at amortized cost as reflecting fair value.
DISTRIBUTIONS AND TAXES
Dividends and Distributions. Dividends from net investment income are
declared and paid at least annually, typically at the end of the Fund's fiscal
year (August 31). Any undistributed net capital gains realized during the Fund's
fiscal year will also be distributed to shareholders after the end of the year,
with a supplemental distribution on or about December 31 of any undistributed
net investment income for the calendar year as well as any additional
undistributed capital gains earned during the 12-month period ended each October
31.
Dividends and capital gain distributions (net of any required tax
withholding) are automatically reinvested in additional shares of the Fund at
the net asset value per share on the reinvestment date unless the shareholder
has previously requested in writing to the Transfer Agent that distributions be
made in cash.
Any dividend or distribution paid by the Fund has the effect of reducing
the net asset value per share on the reinvestment date by the amount of the
dividend or distribution. Investors should note that a dividend or distribution
paid on shares purchased shortly before such dividend or distribution was
declared will be subject to income taxes as discussed below even though the
dividend or distribution represents, in substance, a partial return of capital
to the shareholder.
Taxes. The Fund has qualified and elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As long as the fund continues to qualify, and as long as
the Fund distributes all of its income each year to the shareholders, the Fund
will not be subject to any federal income or excise taxes. The Distributions
made by the Fund will be taxable to shareholders whether received in shares
(through dividend reinvestment) or in cash. Distributions derived from net
investment income, including net short-term capital gains, are taxable to
shareholders as ordinary income. A portion of these distributions may qualify
for the intercorporate dividends-received deduction. Distributions designated as
capital gains dividends are taxable as long-term capital gains regardless of the
length of time shares of the Fund have been held. Although distributions are
generally taxable when received, certain distributions made in January are
taxable as if received the prior December. Shareholders will be informed
annually of the amount and nature of the Fund's distributions. Additional
information about taxes is set forth in the Statement of Additional Information.
Shareholders should consult their own advisers concerning federal, state and
local tax consequences of investments in the Fund.
GENERAL INFORMATION
The Trust. The Trust was organized as a Massachusetts business trust on
February 17, 1987. The Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest, without par value, which may be issued in any number of
series. The Board of Trustees may from time to time issue other series, the
assets and liabilities of which will be separate and distinct from any other
series.
Shareholder Rights. Shares issued by the Fund have no preemptive,
conversion, or subscription rights. Shareholders have equal and exclusive rights
as to dividends and distributions as declared by the Fund and to the net assets
of the Fund upon liquidation or dissolution. The Fund, as a separate series of
the Trust, votes separately on matters affecting only the Fund (e.g., approval
of a change in the Fund's investment objective); all series of the Trust vote as
a single class on matters affecting all series jointly or the Trust as a whole
(e.g., election or removal of Trustees). Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in any election of
Trustees can, if they so choose, elect all of the Trustees. While the Trust is
not required and does not intend to hold annual meetings of shareholders, such
meetings may be called by the Trustees in their discretion, or upon demand by
the holders of 10% or more of the outstanding shares of the Trust for the
purpose of electing or removing Trustees.
Performance Information. From time to time, the Fund may publish its total
return in advertisements and communications to investors. Total return
information will include the Fund's average annual compounded rate of return
over the most recent year and over the period from the Fund's inception of
operations, through the most recent calendar quarter. The Fund may also
advertise aggregate and average total return information over different periods
of time. The Fund's total return will be based upon the value of the shares
acquired through a hypothetical $1,000 investment at the beginning of the
specified period and the net asset value of such shares at the end of the
period, assuming reinvestment of all distributions. Total return figures will
reflect all recurring charges against Fund income. Investors should note that
the investment results of the Fund will fluctuate over time, and any
presentation of the Fund's total return for any prior period should not be
considered as a representation of what an investor's total return may be in any
future period.
Custodian and Transfer Agent; Shareholder Inquiries. Star Bank, 425
Walnut St., Cincinnati, OH 45202, serves as custodian of the Fund's assets.
American Data Services, P.O. Box 5536, Hauppauge, NY 11788-0132 is the Fund's
Transfer Agent. Shareholder inquiries should be directed to the Transfer Agent
at (800) 385-7003.
Advisor
LIGHTHOUSE CAPITAL MANAGEMENT, INC.
10000 Memorial Drive, Suite 660
Houston, Texas 77024
(713) 688-6881
Account Inquiries (800) 282-2340
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, Arizona 85018
Custodian
STAR BANK, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Transfer Agent
AMERICAN DATA SERVICES, INC.
P. O. Box 5536
Hauppauge, New York 11788-0132
Auditors
ERNST & YOUNG, L.L.P.
515 South Flower Street
Los Angeles, California 90071
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER, L.L.P.
345 California Street
San Francisco, California 94104
PROSPECTUS
November , 1997
STATEMENT OF ADDITIONAL INFORMATION
November 12, 1997
LIGHTHOUSE CONTRARIAN FUND
a series of
PROFESSIONALLY MANAGED PORTFOLIOS
10000 Memorial Drive, Suite 660
Houston, TX 77024
(713) 688-6881
This Statement of Additional Information is not a prospectus and it should be
read in conjunction with the prospectus of the Lighthouse Contrarian Fund (the
"Fund"). A copy of the prospectus of the Fund dated November 12, 1997 is
available by calling the number listed above or (212) 633-9700.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
The Trust.......................................................................................................B-2
Investment Objective And Policies ..............................................................................B-2
Investment Restrictions.........................................................................................B-6
Distributions and Tax Information...............................................................................B-7
Trustees And Executive Officers................................................................................B-10
The Fund's Investment Advisor..................................................................................B-11
The Fund's Administrator.......................................................................................B-12
The Fund's Distributor.........................................................................................B-13
Execution of Portfolio Transactions............................................................................B-13
Additional Purchase and Redemption Information.................................................................B-15
Determination of Share Price...................................................................................B-16
Performance Information........................................................................................B-17
General Information............................................................................................B-17
Financial Statements...........................................................................................B-18
</TABLE>
Lighthouse SAI B-1
<PAGE>
THE TRUST
Professionally Managed Portfolios (the "Trust") is an open-end
management investment company organized as a Massachusetts business trust. The
Trust consists of various series which represent separate investment portfolios.
This Statement of Additional Information relates only to the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Lighthouse Contrarian Fund (the "Fund") is a mutual fund with the
investment objective of seeking growth of capital. The following discussion
supplements the discussion of the Fund's investment objective and policies as
set forth in the Prospectus. There can be no assurance the objective of the Fund
will be attained. The Fund was formerly known as the Lighthouse Growth Fund.
Repurchase Agreements
The Fund may enter into repurchase agreements as discussed in the
Prospectus. Under such agreements, the seller of the security agrees to
repurchase it at a mutually agreed upon time and price. The repurchase price may
be higher than the purchase price, the difference being income to the Fund, or
the purchase and repurchase prices may be the same, with interest at a stated
rate due to the Fund together with the repurchase price on repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the U.S.
Government security itself. Such repurchase agreements will be made only with
banks with assets of $500 million or more that are insured by the Federal
Deposit Insurance Corporation or with Government securities dealers recognized
by the Federal Reserve Board and registered as broker-dealers with the
Securities and Exchange Commission ("SEC") or exempt from such registration. The
Fund will generally enter into repurchase agreements of short durations, from
overnight to one week, although the underlying securities generally have longer
maturities. The Fund may not enter into a repurchase agreement with more than
seven days to maturity if, as a result, more than 15% of the value of the Fund's
total assets would be invested in illiquid securities including such repurchase
agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Fund has not perfected a security interest in the U.S. Government
security, the Fund may be required to return the
Lighthouse SAI B-2
<PAGE>
security to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at the risk of losing some
or all of the principal and income involved in the transaction. As with any
unsecured debt instrument purchased for the Fund, the Investment Advisor seeks
to minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller of the U.S. Government
security.
Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security. However, the
Fund will always receive as collateral for any repurchase agreement to which it
is a party securities acceptable to it, the market value of which is equal to at
least 100% of the amount invested by the Fund plus accrued interest, and the
Fund will make payment against such securities only upon physical delivery or
evidence of book entry transfer to the account of its Custodian. If the market
value of the U.S. Government security subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Fund will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
Other Investment Practices
The Fund is authorized to make use of the following investment
practices, but only to the extent of up to 5% of its net assets with respect to
any given practice.
Securities Lending
Although the Fund's objective is growth of capital, the Fund reserves
the right to lend its portfolio securities in order to generate income from time
to time. Securities may be loaned to broker-dealers, major banks or other
recognized domestic institutional borrowers of securities who are not affiliated
with the Advisor or Distributor and whose creditworthiness is acceptable to the
Advisor. The borrower must deliver to the Fund cash or cash equivalent
collateral, or provide to the Fund an irrevocable letter of credit equal in
value to at least 100% of the value of the loaned securities at all times during
the loan, marked to market daily. During the time the portfolio securities are
on loan, the borrower pays the Fund any interest paid on such securities. The
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income if the borrower has delivered
equivalent collateral or a letter of credit. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the income earned on the cash to the borrower or placing
broker. Loans are subject to termination at the option of the Fund or the
borrower at any time. It is not anticipated that more than 5% of the value of
the Fund's portfolio securities will be subject to lending.
Lighthouse SAI B-3
<PAGE>
Foreign Investments
The Fund may invest in foreign securities. Foreign investments can involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, generally are higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S.
markets. Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may invoke increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It also may be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that an Adviser will be able to
anticipate or counter these potential events and their impacts on the Fund's
share price.
American Depositary Receipts and European Depositary Receipts ("ADRs"
and "EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets, respectively, ADRs and EDRs are
alternatives to the purchase of the underlying securities in their national
market and currencies.
ADR's and closed-end investment companies traded in U.S. markets are
not considered foreign securities for purposes of the 5% limitation on
investments in foreign issuers noted above.
Options Transactions
The Fund may purchase and write call and put options on securities and
securities indexes. Transactions in options on securities and on indexes involve
certain risks. For example, there are
Lighthouse SAI B-4
<PAGE>
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option may expire worthless. If the Fund
were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the option
expired without exercise. As the writer of a covered call option, the Fund
forgoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased by the Fund, the Fund
would not be able to close out the option. If restrictions on exercise were
imposed, the Fund might be unable to exercise an option it has purchased. Except
to the extent that a call option on an index written by the Fund is covered by
an option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; such losses may be mitigated or exacerbated by
changes in the value of the Fund's securities during the period the option was
outstanding.
Options markets may not be liquid in all circumstances and certain over
the counter options may have no markets. As a result, in certain markets, the
Fund might not be able to close out a transaction at all or without incurring
losses. Although the use of options for hedging should minimize the risk of loss
due to a decline in the value of the hedged position, at the same time they tend
to limit any potential gain which might result from an increase in the value of
such position. If losses were to result from the use of such transactions, they
could reduce net asset value and possibly income.
Leverage Through Borrowing
The Fund may borrow money for leveraging purposes. Leveraging creates
an opportunity for increased net income but, at the same time, creates special
risk considerations. For example, leveraging may exaggerate changes in the net
asset value of Fund shares and in the yield on the Fund's portfolio. Although
the principal of such borrowings will be fixed, the Fund's assets may change in
value during the time the borrowing is outstanding. Leveraging will create
interest expenses for the Fund which can exceed the income from the assets
retained. To the extent the income derived from securities purchased with
borrowed funds exceeds the interest the Fund will have to pay, the Fund's net
income will be greater than if leveraging were not used. Conversely, if the
income from the assets retained with borrowed funds is not sufficient to cover
the cost of leveraging, the net income of the
Lighthouse SAI B-5
<PAGE>
Fund will be less than if leveraging were not used, and therefore the amount
available for distribution to stockholders as dividends will be reduced.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by
the Fund and (unless otherwise noted) are fundamental and cannot be changed
without the affirmative vote of a majority of the Fund's outstanding voting
securities as defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the purchase of debt
securities in accordance with its investment objectives and policies, (b)
through the lending of its portfolio securities as described above and in its
Prospectus, or (c) to the extent the entry into a repurchase agreement is deemed
to be a loan.
2. (a) Borrow money, except as stated in the Prospectus and this
Statement of Additional Information. Any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300% of all
borrowings.
(b) Mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and
several basis in any securities trading account, or underwrite securities. (Does
not preclude the Fund from obtaining such short-term credit as may be necessary
for the clearance of purchases and sales of its portfolio securities.)
4. Purchase or sell real estate or commodities or commodity contracts
(the Board of Trustees may in the future authorize the Fund to engage in certain
activities regarding futures contracts for bona fide hedging purposes; any such
authorization will be accompanied by appropriate notification to shareholders).
5. Invest 25% or more of the market value of its assets in the
securities of companies engaged in any one industry. (Does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.)
6. Issue senior securities, as defined in the 1940 Act, except that
this restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into options,
futures or repurchase transactions.
7. Invest in any issuer for purposes of exercising control or
management.
Lighthouse SAI B-6
<PAGE>
The Fund observes the following policies, which are not deemed
fundamental and which may be changed without shareholder vote. The Fund may not:
8. Invest in securities of other investment companies which would
result in the Fund owning more than 3% of the outstanding voting securities of
any one such investment company, the Fund owning securities of another
investment company having an aggregate value in excess of 5% of the value of the
Fund's total assets, or the Fund owning securities of investment companies in
the aggregate which would exceed 10% of the value of the Fund's total assets.
9. Invest, in the aggregate, more than 15% of its total assets in
securities with legal or contractual restrictions on resale, securities which
are not readily marketable and repurchase agreements with more than seven days
to maturity.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in a percentage resulting from a change in the
values of assets will not constitute a violation of that restriction, except
with respect to policies on borrowing or as otherwise noted.
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually, as described in the
Prospectus after the conclusion of the Fund's fiscal year (August 31). Also, the
Fund expects to distribute any undistributed net investment income on or about
December 31 of each year. Any net capital gains realized through the period
ended October 31 of each year will also be distributed by December 31 of each
year.
Each distribution by the Fund is accompanied by a brief explanation of
the form and character of the distribution. In January of each year the Fund
will issue to each shareholder a statement of the federal income tax status of
all distributions.
Tax Information
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to continue to qualify and elect to be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), provided it complies with all
applicable requirements regarding the source of its income, diversification of
its assets and timing of distributions. The Fund's policy is to distribute to
its shareholders all of its investment company taxable income and any net
realized long-term capital gains for each fiscal year in a manner that complies
with the distribution requirements of the Code, so that the Fund will not be
subject to any federal income or excise taxes. To comply with the requirements,
the Fund must also distribute (or be deemed to have distributed) by December 31
of each calendar year (i) at least 98% of its
Lighthouse SAI B-7
<PAGE>
ordinary income for such year, (ii) at least 98% of the excess of its realized
capital gains over its realized capital losses for the 12-month period ending on
October 31 during such year and (iii) any amounts from the prior calendar year
that were not distributed and on which the Fund paid no federal income tax.
Net investment income consists of interest and dividend income, less
expenses. Net realized capital gains for a fiscal period are computed by taking
into account any capital loss carryforward of the Fund.
Distributions of net investment income and net short-term capital gains
are taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Fund designates the amount
distributed as a qualifying dividend. The aggregate amount so designated cannot,
however, exceed the aggregate amount of qualifying dividends received by the
Fund for its taxable year. In view of the Fund's investment policy, it is
expected that dividends from domestic corporations will be part of the Fund's
gross income and that, accordingly, part of the distributions by the Fund may be
eligible for the dividends-received deduction for corporate shareholders.
However, the portion of the Fund's gross income attributable to qualifying
dividends is largely dependent on that Fund's investment activities for a
particular year and therefore cannot be predicted with any certainty. The
deduction may be reduced or eliminated if the Fund shares held by a corporate
investor are treated as debt-financed or are held for less than 46 days.
Distributions of the excess of net long-term capital gains over net
short-term capital losses are taxable to shareholders as long-term capital
gains, regardless of the length of time they have held their shares. Capital
gains distributions are not eligible for the dividends-received deduction
referred to in the previous paragraph. Distributions of any net investment
income and net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders electing to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
The Fund may write, purchase or sell certain option, futures, and
foreign currency contracts. Such transactions are subject to special tax rules
that may affect the amount, timing and character of distributions to
shareholders. Unless the Fund is eligible to make and makes a special election,
such contracts that are "Section 1256 contracts" will be "marked-to-market" for
federal income tax purposes at the end of each taxable year, i.e., each contract
will be treated as sold for its fair market value on the last day of the taxable
year. In general, unless the special election referred to in the previous
sentence is made, gain or loss from transactions in such contracts will be 60%
long-term and 40% short-term capital gain or loss. Section 1092 of the Code,
which applies to certain "straddles", may affect the taxation of the Fund's
transactions in option, futures and foreign currency contracts.
Lighthouse SAI B-8
<PAGE>
Under Section 1092 of the Code, the Fund may be required to postpone recognition
for securities held for less than three months. Accordingly, the Fund may be
restricted in effecting closing transactions within three months after entering
into an option contract.
A redemption of Fund shares may result in recognition of a taxable gain
or loss. Any loss realized upon a redemption of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gains during
such six-month period. Any loss realized upon a redemption of Fund shares may be
disallowed under certain wash sale rules to the extent shares of the Fund are
purchased (through reinvestment of distributions or otherwise) within 30 days
before or after the redemption.
Under the Code, the Fund will be required to report to the Internal
Revenue Service ("IRS") all distributions of taxable income and capital gains as
well as gross proceeds from the redemption or exchange of Fund shares, except in
the case of exempt shareholders, which includes most corporations. Pursuant to
the backup withholding provisions of the Internal Revenue Code, distributions of
any taxable income and capital gains and proceeds from the redemption of Fund
shares may be subject to withholding of federal income tax at the rate of 31
percent in the case of non-exempt shareholders who fail to furnish the Fund with
their taxpayer identification numbers and with required certifications regarding
their status under the federal income tax law. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld. Corporate and other exempt shareholders should provide the Fund with
their taxpayer identification numbers or certify their exempt status in order to
avoid possible erroneous application of backup withholding. The Fund reserves
the right to refuse to open an account for any person failing to provide a
certified taxpayer identification number.
The Fund will not be subject to tax in the Commonwealth of
Massachusetts as long as it qualifies as a regulated investment company for
federal income tax purposes. Distributions and the transactions referred to in
the preceding paragraphs may be subject to state and local income taxes, and the
tax treatment thereof may differ from the federal income tax treatment.
Moreover, the above discussion is not intended to be a complete discussion of
all applicable federal tax consequences of an investment in the Fund.
Shareholders are advised to consult with their own tax advisers concerning the
application of federal, state and local taxes to an investment in the Fund.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
This discussion and the related discussion in the prospectus have been
prepared by Fund management, and counsel to the Fund has expressed no opinion in
respect thereof.
Lighthouse SAI B-9
<PAGE>
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by
the initial shareholders of the Trust, are responsible for the overall
management of the Trust, including general supervision and review of the
investment activities of the Fund. The Trustees, in turn, elect the officers of
the Trust, who are responsible for administering the day-to-day operations of
the Trust and its separate series. The current Trustees and officers and their
affiliations and principal occupations for the past five years are set forth
below.
Steven J. Paggioli,* 47 President and Trustee
479 West 22nd Street, New York, New York 10011. Executive Vice President, The
Wadsworth Group (consultants) since 1986; Executive Vice President of Investment
Company Administration Corporation ("ICAC") (mutual fund administrator and the
Trust's administrator),and Vice President of First Fund Distributors, Inc.
("FFD") (a registered broker-dealer and the Fund's Distributor) since 1990.
Dorothy A. Berry, 54 Trustee
14 Five Roses East, Ancram, NY 12517. President, Talon Industries (venture
capital and business consulting); formerly Chief Operating Officer, Integrated
Asset Management (investment advisor and manager) and formerly President, Value
Line, Inc., (investment advisory and financial publishing firm).
Wallace L. Cook, 58 Trustee
One Peabody Lane, Darien, CT 06820. Retired. Formerly Senior Vice President,
Rockefeller Trust Co. Financial Counselor, Rockefeller & Co.
Carl A. Froebel, 59 Trustee
2 Crown Cove Lane, Savannah, GA 31411. Private Investor. Formerly Managing
Director, Premier Solutions, Ltd. Formerly President and Founder, National
Investor Data Services, Inc. (investment related computer software).
Rowley W.P. Redington, 53 Trustee
1191 Valley Road, Clifton, New Jersey 07103. President; Intertech (consumer
electronics and computer service and marketing); formerly Vice President, PRS of
New Jersey, Inc. (management consulting), and Chief Executive Officer, Rowley
Associates (consultants).
Lighthouse SAI B-10
<PAGE>
Eric M. Banhazl*, 40 Treasurer
2025 E. Financial Way, Suite 101, Glendora, California 91741. Senior Vice
President, The Wadsworth Group, Senior Vice President of ICAC and Vice President
of FFD since 1990.
Robin Berger*, 40 Secretary
479 West 22nd St., New York, New York 10011. Vice President, The Wadsworth Group
since June, 1993; formerly Regulatory and Compliance Coordinator, Equitable
Capital Management, Inc. (1991- 93).
Robert H. Wadsworth*, 57 Vice President
4455 E. Camelback Road, Suite 261E, Phoenix, Arizona 85018. President of The
Wadsworth Group since 1982, President of ICAC and FFD since 1990.
*Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the rate of compensation received by the following
Trustees from the Fund and all other portfolios of the Trust. This total amount
is allocated among the portfolios. Disinterested trustees receive an annual
retainer of $7,500 and a fee of $2,500 for each regularly scheduled meeting.
These trustees also receive a fee of $1000 for any special meeting attended. The
Chairman of the Board of Trustees receives an additional annual retainer of
$4,500. Disinterested trustees are also reimbursed for expenses in connection
with each Board meeting attended. No other compensation or retirement benefits
were received by any Trustee or officer from the Fund or any other portfolios of
the Trust.
Name of Trustee Total Annual Compensation
Dorothy A. Berry $22,000
Wallace L. Cook $17,500
Carl A. Froebel $17,500
Rowley W.P. Redington $17,500
During the fiscal year ended August 31, 1997, trustees' fees and
expenses in the amount of $5,235 were allocated to the Fund. As of the date of
this Statement of Additional Information, the Trustees and Officers of the Trust
as a group did not own more than 1% of the outstanding shares of the Fund.
THE FUND'S INVESTMENT ADVISOR
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund. The Advisor is located at
10000 Memorial Drive, Suite 660, Houston,
Lighthouse SAI B-11
<PAGE>
TX 77024. The Advisor was founded in 1988 and is controlled by Mr. Paul G.
Horton, President and Managing Director and Mr. Kevin P. Duffy, Research
Director and Portfolio Manager. While the Advisor has not previously advised a
registered investment company, it provides investment advisory services to
individual and institutional investors with assets of approximately $360
million. Mr. Duffy is responsible for management of the Fund's portfolio.
Under the Investment Advisory Agreement with the Fund, the Advisor
provides the Fund with advice on buying and selling securities, manages the
investments of the Fund, furnishes the Fund with office space and certain
administrative services, and provides most of the personnel needed by the Fund.
As compensation, the Fund pays the Advisor a monthly management fee (accrued
daily) based upon the average daily net assets of the Fund at the rate of 1.25%
annually. During the Fund's initial fiscal period ended August 31, 1996 and its
fiscal year ended August 31, 1997, advisory fees totaled $92,926 and $277,492,
respectively; during these periods, the Advisor reimbursed the Fund for expenses
in the amounts of $71,298 and $53,616, respectively, in order to limit the
Fund's operating expenses to no more than 2.00% of average net assets.
The Investment Advisory Agreement continues in effect for successive
annual periods so long as such continuation is approved at least annually by the
vote of (1) the Board of Trustees of the Trust (or a majority of the outstanding
shares of the Fund to which the agreement applies), and (2) a majority of the
Trustees who are not interested persons of any party to the Agreement, in each
case cast in person at a meeting called for the purpose of voting on such
approval. Any such agreement may be terminated at any time, without penalty, by
either party to the agreement upon sixty days' written notice and is
automatically terminated in the event of its "assignment," as defined in the
1940 Act.
THE FUND'S ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company
Administration Corporation (the "Administrator"), a corporation owned and
controlled by Messrs. Banhazl, Paggioli and Wadsworth with offices at 4455 E.
Camelback Rd., Ste. 261-E, Phoenix, AZ 85018. The Administration Agreement
provides that the Administrator will prepare and coordinate reports and other
materials supplied to the Trustees; prepare and/or supervise the preparation and
filing of all securities filings, periodic financial reports, prospectuses,
statements of additional information, marketing materials, tax returns,
shareholder reports and other regulatory reports or filings required of the
Fund; prepare all required filings necessary to maintain the Fund's
qualification and/or registration to sell shares in all states where the Fund
currently does, or intends to do business; coordinate the preparation, printing
and mailing of all materials (e.g., Annual Reports) required to be sent to
shareholders; coordinate the preparation and payment of Fund related expenses;
monitor and oversee the activities of the Fund's servicing agents (i.e.,
transfer agent, custodian, fund accountants, etc.); review and adjust as
necessary the Fund's daily expense accruals; and perform such additional
services as may be agreed upon by the Fund and the Administrator. For its
services, ICAC receives a monthly fee at the following annual rate:
Lighthouse SAI B-12
<PAGE>
Average net assets of the Fund Fee or fee rate
Under $15 million $30,000
$15 to $50 million 0.20% of average net assets
$50 to $100 million 0.15% of average net assets
$100 to $150 million 0.10% of average net assets
Over $150 million 0.05% of average net assets
During the Fund's initial fiscal period ended August 31, 1996 and its
fiscal year ended August 31,1997, the Administrator received fees of $24,698 and
$43,889, respectively.
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc., (the "Distributor"), a corporation owned
by Mr. Banhazl, Mr. Paggioli and Mr. Wadsworth, acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. The
Distribution Agreement between the Fund and the Distributor continues in effect
for periods not exceeding one year if approved at least annually by (i) the
Board of Trustees or the vote of a majority of the outstanding shares of the
Fund (as defined in the 1940 Act) and (ii) a majority of the Trustees who are
not interested persons of any such party, in each case cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated without penalty by the parties thereto upon sixty
days' written notice, and is automatically terminated in the event of its
assignment as defined in the 1940 Act.
The Fund has adopted a Distribution Plan in accordance with Rule 12b-1
under the 1940 Act. The Plan provides that the Fund will pay a fee to the
Distributor at an annual rate of up to 0.25% of the average daily net assets of
the Fund. The fee is paid to the Advisor as Distribution Coordinator as
reimbursement of, or in anticipation of, expenses incurred for distribution
related activity. During the Fund's fiscal year ended August 31, 1997, the Fund
paid fees of $39,365 to the Advisor, of which $27,339 was paid out as selling
compensation to dealers and $2,439 was for reimbursement of printing expenses,
$421 was for reimbursement of travel and entertainment expenses and $9,122 was
for reimbursement of advertising/sales literature expenses.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser determines
which securities are to be purchased and sold by the Fund and which
broker-dealers will be used to execute the Fund's portfolio transactions.
Purchases and sales of securities in the over-the-counter market will be
executed directly with a "market-maker" unless, in the opinion of the Adviser, a
better price and execution can otherwise be obtained by using a broker for the
transaction.
Lighthouse SAI B-13
<PAGE>
Purchases of portfolio securities for the Fund also may be made
directly from issuers or from underwriters. Where possible, purchase and sale
transactions will be effected through dealers (including banks) which specialize
in the types of securities which the Fund will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principal for their own account. Purchases from underwriters will include a
concession paid by the issuer to the underwriter and purchases from dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one broker, dealer or underwriter are comparable, the
order may be allocated to a broker, dealer or underwriter that has provided
research or other services as discussed below.
In placing portfolio transactions, the Adviser will use its best
efforts to choose a broker-dealer capable of providing the services necessary to
obtain the most favorable price and execution available. The full range and
quality of services available will be considered in making these determinations,
such as the size of the order, the difficulty of execution, the operational
facilities of the firm involved, the firm's risk in positioning a block of
securities, and other factors. In those instances where it is reasonably
determined that more than one broker-dealer can offer the most favorable price
and execution available, consideration may be given to those broker-dealers
which furnish or supply research and statistical information to the Adviser that
it may lawfully and appropriately use in its investment advisory capacities, as
well as provide other services in addition to execution services. The Adviser
considers such information, which is in addition to and not in lieu of the
services required to be performed by it under its Agreement with the Fund, to be
useful in varying degrees, but of indeterminable value. Portfolio transactions
may be placed with broker-dealers who sell shares of the Fund subject to rules
adopted by the National Association of Securities Dealers, Inc.
While it is the Fund's general policy to seek first to obtain the most
favorable price and execution available, in selecting a broker-dealer to execute
portfolio transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Adviser, even if the specific services are not directly useful to the Fund and
may be useful to the Adviser in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Adviser to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Adviser's overall responsibilities to the
Fund.
Investment decisions for the Fund are made independently from those of
other client accounts or mutual funds managed or advised by the Adviser.
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Fund and one or more of such client accounts. In such
event, the position of the Fund and such client account(s) in the same issuer
may vary and the length of time that each may choose to hold its investment in
the same issuer may likewise vary. However, to the extent any of these client
accounts seeks to acquire the same security as the Fund at the same time, the
Fund may not be able to acquire as large a portion of such security as it
desires, or it may
Lighthouse SAI B-14
<PAGE>
have to pay a higher price or obtain a lower yield for such security. Similarly,
the Fund may not be able to obtain as high a price for, or as large an execution
of, an order to sell any particular security at the same time. If one or more of
such client accounts simultaneously purchases or sells the same security that
the Fund is purchasing or selling, each day's transactions in such security will
be allocated between the Fund and all such client accounts in a manner deemed
equitable by the Adviser, taking into account the respective sizes of the
accounts and the amount being purchased or sold. It is recognized that in some
cases this system could have a detrimental effect on the price or value of the
security insofar as the Fund is concerned. In other cases, however, it is
believed that the ability of the Fund to participate in volume transactions may
produce better executions for the Fund.
The Fund does not effect securities transactions through brokers solely
for selling shares of the Fund, although the Fund may consider the sale of
shares as a factor in allocating brokerage. However, as stated above,
broker-dealers who execute brokerage transactions may effect purchases of shares
of the Fund for their customers. During the Fund's initial fiscal period ended
August 31,1996 and for its fiscal year ended August 31,1997, brokerage
commissions paid by the Fund totaled $31,341 and $58,519, respectively.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of the Fund's shares, (ii) to reject purchase orders in whole
or in part when in the judgment of the Manager or the Distributor such rejection
is in the best interest of the Fund, and (iii) to reduce or waive the minimum
for initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
Payments to shareholders for shares of the Fund redeemed directly from
the Fund will be made as promptly as possible but no later than seven days after
receipt by the Fund's Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Fund
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange is restricted as
determined by the SEC or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders. At various times, the Fund may be
requested to redeem shares for which it has not yet received confirmation of
good payment; in this circumstance, the Fund may delay the redemption until
payment for the purchase of such shares has been collected and confirmed to the
Fund.
The Fund intends to pay cash (U.S. dollars) for all shares redeemed,
but, under abnormal conditions which make payment in cash unwise, the Fund may
make payment partly in securities with a current market value equal to the
redemption price. Although the Fund does not anticipate that it will make any
part of a redemption payment in securities, if such payment were made, an
investor may
Lighthouse SAI B-15
<PAGE>
incur brokerage costs in converting such securities to cash. The Fund has
elected to be governed by the provisions of Rule 18f-1 under the 1940 Act, which
contains a formula for determining the minimum redemption amounts that must be
paid in cash.
The value of shares on redemption or repurchase may be more or less
than the investor's cost, depending upon the market value of the Fund's
portfolio securities at the time of redemption or repurchase.
Check-A-Matic
As discussed in the Prospectus, the Fund provides a Check-A-Matic Plan
for the convenience of investors who wish to purchase shares of the Fund on a
regular basis. All record keeping and custodial costs of the Check-A-Matic Plan
are paid by the Fund. The market value of the Fund's shares is subject to
fluctuation, so before undertaking any plan for systematic investment, the
investor should keep in mind that this plan does not assure a profit nor protect
against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of
shares of the Fund will be determined once daily as of the close of public
trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time) on
each day that the Exchange is open for trading. It is expected that the Exchange
will be closed on Saturdays and Sundays and on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas. The Fund does not expect to determine
the net asset value of its shares on any day when the Exchange is not open for
trading even if there is sufficient trading in its portfolio securities on such
days to materially affect the net asset value per share.
In valuing the Fund's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Trustees of the
Trust shall determine in good faith to reflect the security's fair value. All
other assets of each Fund are valued in such manner as the Board of Trustees in
good faith deems appropriate to reflect their fair value.
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
Lighthouse SAI B-16
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in
advertisements and investor communications. Total return may be stated for any
relevant period as specified in the advertisement or communication. Any
statements of total return will be accompanied by information on the Fund's
average annual compounded rate of return over the most recent four calendar
quarters and the period from the Fund's inception of operations. The Fund may
also advertise aggregate and average total return information over different
periods of time.
The Fund's total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of a Fund's performance
by independent sources may also be used in advertisements and in information
furnished to present or prospective investors in the Funds.
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for any
period should not be considered as a representation of what an investment may
earn or what an investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which
the maximum sales load is deducted
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that
the results are not annualized. The Fund's average annual total return since its
inception on September 29, 1995 through August 31, 1997 was 16.60% and for the 1
year period ending August 31, 1997 was 18.22%.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
Lighthouse SAI B-17
<PAGE>
Star Bank N.A., 425 Walnut St., Cincinnati, OH 45202 acts as Custodian
of the securities and other assets of the Fund. The Custodian does not
participate in decisions relating to the purchase and sale of securities by the
Fund. American Data Services, Inc. P.O. Box 5536, Hauppauge, NY 11788- 0132 acts
as the Fund's transfer and shareholder service agent.
Ernst & Young LLP, 515 South Flower St., Los Angeles, CA 90071 are the
independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker, 345 California Street, 29th Floor,
San Francisco, California 94104, are legal counsel to the Fund.
On November 7, 1997, the following persons owned of record and/or
beneficially more than 5% of the Fund's outstanding voting securities:
Charles Schwab & Co. Special Custody Account for Customers, San
Francisco, CA: 43.36%
Cenco, P.O. Box 10566, Birmingham, AL 35296: 7.69%
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Agreement and Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust. The
Agreement and Declaration of Trust also provides for indemnification and
reimbursement of expenses out of the Fund's assets for any shareholder held
personally liable for obligations of the Fund or Trust. The Agreement and
Declaration of Trust provides that the Trust shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the Fund or Trust and satisfy any judgment thereon. All such rights are limited
to the assets of the Fund. The Agreement and Declaration of Trust further
provides that the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Furthermore, the activities of the Trust as
an investment company would not likely give rise to liabilities in excess of the
Trust's total assets. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
The Trust is registered with the SEC as a management investment
company. Such a registration does not involve supervision of the management or
policies of the Fund. The Prospectus of the Fund and this Statement of
Additional Information omit certain of the information contained in the
Registration Statement filed with the SEC. Copies of such information may be
obtained from the SEC upon payment of the prescribed fee.
Lighthouse SAI B-18
<PAGE>
FINANCIAL STATEMENTS
The annual report to shareholders for the Fund for the fiscal year
ended August 31,1997 is a separate document supplied with this Statement of
Additional Information and the financial statements therein are incorporated by
reference in this Statement of Additional Information.
Lighthouse SAI B-19
<PAGE>
PROFESSIONALLY MANAGED PORTFOLIOS
FORM N-1A
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements for the fiscal year ended June 30, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended June 30, 1997 (Boston Managed Growth Fund,
Leonetti Balanced Fund and U.S. Global Leaders Growth Fund Series).
Financial Statements: Financial Statements for the fiscal year ended
March 31, 1997: Incorporated by reference from the annual reports to
shareholders for the fiscal year ended March 31, 1997) (Avondale Total
Return, Harris Bretall Sullivan & Smith Growth Equity, Hodges,
Osterweis, Perkins Opportunity and Women's Equity Mutual Fund Series).
Financial Statements for the fiscal year ended April 30, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended April 30, 1997 (Pzena Focused Value Fund and
Titan Financial Services Fund series).
Financial Statements for the fiscal year ended August 31, 1996:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended August 31, 1996 (Academy Value and Trent Equity
Fund Series).
Financial Statements for the fiscal year ended August 31, 1997:
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended August 31, 1997 (Lighthouse Growth Fund
Series).
Financial Statements for the fiscal year ended December 31, 1996;
Incorporated by Reference from the annual reports to shareholders for
the fiscal year ended December 31, 1996 (Matrix Growth Fund Series,
Matrix Emerging Growth Fund Series)
(b) Exhibits:
(1) Agreement and Declaration of Trust-2
(2) By-Laws--2
(3) Voting Trust Agreement -- Not applicable
(4) Specimen Share Certificate-3
(5) Form of Investment Advisory Agreement-1
(6) Form of Distribution Agreement-1
(7) Benefit Plan -- Not applicable
(8) Form of Custodian and Transfer Agent
Agreements-6
(9) Form of Administration Agreement--7
(10) Consent and Opinion of Counsel as to legality of
shares-3
(11) Consent of Accountants
(12) All Financial Statements omitted from Item 23 --
Not applicable
(13) Letter of Understanding relating to initial
capital-3
(14) Model Retirement Plan Documents - Not applicable
(15) Form of Plan pursuant to Rule 12b-1 -1
(16) Schedule for Computation of Performance
Quotations-5
1 Incorporated by reference from Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A, filed on January 16, 1996.
2 Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on December 29, 1995.
3 Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 13, 1987.
4 Incorporated by reference to Post-effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on May 2, 1991.
5 Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A filed on June 17, 1992.
6 To be filed by amendment.
7 Incorporated by reference from Post-Effective Amendment No. 35 to the
Registration Statement on Form N-1A, filed on April 24, 1997.
Item 25. Persons Controlled by or under Common Control with Registrant.
As of the date of this Amendment to the Registration Statement, there
are no persons controlled or under common control with the Registrant.
Item 26. Number of Holders of Securities.
Number of Record
Holders as of
Title of Class October 9, 1997
Shares of Beneficial Interest, no par value:
Academy Value Fund 166
Avondale Total Return Fund 147
Boston Managed Growth Fund 193
Hodges Fund 1,035
Osterweis Fund 126
Perkins Opportunity Fund 7,260
ProConscience Womens Equity Fund 508
Trent Equity Fund 123
Matrix Growth Fund 398
Matrix Emerging Growth Fund 61
Leonetti Balanced Fund 304
Lighthouse Contrarian Fund 381
U.S.Global Leaders Growth Fund 111
Harris, Bretall, Sullivan & Smith
Growth Equity Fund 70
Pzena Focused Value Fund 168
Titan Financial Services Fund 537
Item 27. Indemnification
The information on insurance and indemnification is incorporated by
reference to Pre-Effective Amendment No. 1 and Post-Effective Amendment No. 1 to
the Registrant's Registration Statement.
In addition, insurance coverage for the officers and trustees of the
Registrant also is provided under a Directors and Officers/Errors and Omissions
Liability insurance policy issued by ICI Mutual Insurance Company with a
$1,000,000 limit of liability.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
With respect to Investment Advisors, the response to this item is
incorporated by reference to their Form ADVs as amended:
Herbert R. Smith & Co, Inc. File No. 801-7098
Hodges Capital Management, Inc. File No. 801-35811
Perkins Capital Management, Inc. File No. 801-22888
Osterweis Capital Management File No. 801-18395
Pro-Conscience Funds, Inc. File No. 801-43868
Trent Capital Management, Inc. File No. 801-34570
Academy Capital Management File No. 801-27836
Sena, Weller, Rohs, Williams File No. 801-5326
Leonetti & Associates, Inc. File No. 801-36381
Lighthouse Capital Management File No. 801-32168
Yeager, Wood & Marshall, Inc. File No. 801-4995
Harris Bretall Sullivan & Smith File No. 801-7369
Pzena Investment Management LLC File No. 801-50838
Titan Investment Advisers, LLC File No. 801-51306
Pacific Gemini Partners LLC File No. 801-50007
With respect to United States Trust Company of Boston, the response to this
item is incorporated by reference to the responses to Item 5 of Part A and Item
16 of Part B ("Management")of Post-Effective Amendment No. 20 to the
Registration Statement.
Item 29. Principal Underwriters.
(a) First Fund Distributors, Inc. (the "Distributor") is the principal
underwriter all series of the Registrant except for the Hodges Fund, the Matrix
Growth Fund and the Matrix Emerging Growth Fund. The Distributor acts as
principal underwriter for the following other investment companies:
Advisors Series Trust
Guinness Flight Investment Funds, Inc.
Fremont Mutual Funds, Inc.
Fleming Funds, Inc.
The Purisima Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
UBS Private Investor Funds
First Dallas Securities, Inc., 2311 Cedar Springs Rd., Ste. 100, Dallas, TX
75201, an affiliate of Hodges Capital Management, acts as Distributor of the
Hodges Fund. The President and Chief Financial Officer of First Dallas
Securities, Inc. is Don W. Hodges. First Dallas does not act as principal
underwriter for any other investment companies. Reynolds, DeWitt Securities Co.,
an affiliate of Sena Weller Rohs Williams, 300 Main St., Cincinnati, OH 45202,
acts as Distributor for the Matrix Growth Fund and Matrix Emerging Growth Fund.
(b) The officers of First Fund Distributors, Inc. are:
Robert H. Wadsworth President & Treasurer
Eric Banhazl Vice President
Steven J. Paggioli Secretary
Each officer's business address is 4455 E. Camelback Rd., Ste. 261-E,
Phoenix, AZ 85018. Mr. Paggioli serves as President and a Trustee of the
Registrant. Mr. Wadsworth serves as Vice President of the Registrant. Mr.
Banhazl serves as Treasurer of the Registrant.
c. Incorporated by reference from the Statement of Additional
Information filed herewith as Part B.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Trust documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by each Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 479 West
22nd Street, New York, NY 10011 and 2025 E. Financial Way, Ste. 101, Glendora,
CA 91741.
Item 31. Management Services.
There are no management-related service contracts not discussed in
Parts A and B.
Item 32. Undertakings
The registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of each Fund's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this amendment to this registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York in the State of
New York on November 7, 1997.
PROFESSIONALLY MANAGED PORTFOLIOS
By /S/ Steven J. Paggioli
Steven J. Paggioli
President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
/S/ Steven J. Paggioli Trustee November 7, 1997
Steven J. Paggioli
/S/ Eric M. Banhazl Principal November 7, 1997
Eric M. Banhazl Financial
Officer
Dorothy A. Berry Trustee November 7, 1997
*Dorothy A. Berry
Wallace L. Cook Trustee November 7, 1997
*Wallace L. Cook
Carl A. Froebel Trustee November 7, 1997
*Carl A. Froebel
Rowley W. P. Redington Trustee November 7, 1997
*Rowley W. P. Redington
* By /S/ Steven J. Paggioli
Steven J. Paggioli, Attorney-in-Fact under powers of
attorney as filed with Post-Effective Amendment No. 20 to the
Registration Statement filed on May 17, 1995
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment
No. 40 to the Registration Statement on Form N-1A of Professionally Managed
Portfolios and to the use of our report on the financial statements and
financial highlights dated October 14, 1997 with respect to the Lighthouse
Growth Fund series. Such financial statements and financial highlights appear in
the 1997 Annual Report to Shareholders of the Fund which are incorporated by
reference into the Statement of Additional Information.
Ernst & Young LLP
Los Angeles, CA
November 7, 1997
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